KUWAIT: Gulf Bank KSCP announced its financial results for the first nine months ending September 30, 2024. The Bank reported a net profit of KD 40.2 million, representing a decline of KD 14 million or 25.3 percent compared to a net profit of KD 53.8 million for the same period in 2023.

Additionally, Gulf Bank recorded an operating income of KD 146 million for the first nine months of 2024, an increase of 4.2 percent compared to the same period of last year. Furthermore, operating profit has increased to KD 78.6 million, indicating a robust growth of 4.5 percent compared to the first nine months of 2023.

For the third quarter of 2024, the Bank reported a net profit of KD 12.0 million, a decline of 33.2 percent over the third quarter of 2023. Operating income for the third quarter of 2024 was KD 49.2 million, an increase of 2.7 percent compared to the same period of last year and operating profit was KD 26.1 million, with an increase of 0.5 percent over the same period of last year.

The decline in net profit for the first nine months of 2024 is primarily attributed to an increase in total provisions and impairments, which increased by KD 17.6 million for the first nine months compared to the same period last year. Nevertheless, the Bank remains committed to prudent risk management practices, building on its strong financial position to contribute and support future growth opportunities. Regarding asset quality, the non-performing loans (NPL) ratio was 1.3 percent as of September 30, 2024, compared to the prior year level of 1.2 percent.

The Bank also maintains a significant non-performing loans coverage ratio of 334 percent including total provisions and collaterals. As of September 30, 2024, total credit provisions reached KD 275 million, whereas IFRS 9 accounting requirements (i.e., ECL or expected credit losses) were KD 175 million. This results in a substantial excess provision level of KD 99 million, over and above what is mandated by IFRS 9 accounting requirements.

In comparison to December 31, 2023, total assets increased by 4.2 percent to KD 7.5 billion, with net loans and advances rising by 6.9 percent to KD 5.6 billion. Total deposits also grew by 6.9 percent to KD 5.7 billion, while total shareholders’ equity reached KD 814 million.

The Bank’s regulatory Tier 1 ratio of 14.2 percent was 2.2 percent above the regulatory minimum of 12 percent, and the Capital Adequacy Ratio (CAR) of 16.3 percent was 2.3 percent above the regulatory minimum of 14 percent. This solid capital position reinforces the Bank’s ability to foster long-term development while adhering to regulatory standards.

Performance and growth

Commenting on Gulf Bank’s financial results for the first nine months 2024, Bader Nasser Al-Kharafi, Gulf Bank’s Chairman, stated: “While the Bank’s performance during this period reflects the impact of increased credit costs, our operating profit maintains its growth trajectory momentum reaching KD 78.6 million for the first nine months of 2024 representing an increase of 4.5 percent when compared to the same period of last year.”

He added: “The recent 50 basis point rate cut by the Federal Reserve, followed by a 25-basis point reduction in the discount rate by the Central Bank of Kuwait, represents a positive step towards stimulating economic growth. We expect these rate cuts to help alleviate financial burdens and encourage lending activity, providing us with opportunities to support our customers and contribute to economic recovery. Although challenges persist, we are confident that this development will create favorable environment for improved performance in the upcoming quarters.”

Waleed Khaled Mandani, Gulf Bank Acting CEO, commented on the current credit costs and provisions at Gulf Bank, stating: “Our credit profile has demonstrated considerable resilience this quarter, largely attributed to the resolution of selected non-performing legacy corporate accounts. This proactive approach has allowed us to continue to maintain one of the lowest Stage Two loan ratios in the local banking sector, reflecting our commitment to a sound risk management framework and a robust asset quality.”

Financing opportunities

Mandani, emphasized on the significant advancements in Kuwait’s project development landscape and its positive impact on the banking sector, particularly in the corporate space. He stated: “Recent developments in Kuwait’s project landscape have led to strong growth in capital spending within the infrastructure and energy sectors, presenting significant opportunities for the banking industry. In its 2024-2025 fiscal budget, Kuwait has planned total expenditure worth of KD 24.6 billion of which 9.3 percent is allocated for capital expenditure. In 2024, major announcements were made related to transportation and construction projects, with a multimillion worth of contracts already awarded this year, particularly within sectors like energy, infrastructure, and residential developments.”

Mandani added: “These large-scale infrastructure investments will drive demand for corporate lending and financing solutions, creating avenues for banks to engage in funding and advisory roles. At Gulf Bank, we are well-positioned to support these initiatives, leveraging on our robust financial capabilities and corporate expertise to participate in these investments. We are committed to playing a pivotal role in financing Kuwait’s future growth ambitions, ensuring that we provide flexible and customized banking and advisory services meeting the diverse banking needs of our stakeholders.”

Merger with Boubyan Bank

Gulf Bank has been actively pursuing strategic initiatives to enhance its growth and shareholder value. On 11 June 2024, the Bank’s Board of Directors approved the engagement of an international consultant to conduct a feasibility study on converting Gulf Bank into a Sharia-compliant institution. This decision, made in alignment with Central Bank of Kuwait (CBK) guidelines, reflects the Bank’s commitment to exploring new avenues for development in compliance with Islamic principles.

Subsequently, on July 30, 2024, Gulf Bank’s Board approved a proposal for a potential merger with Boubyan Bank. The proposed merger aims to create a unified entity compliant with Islamic Sharia, with the intent of expanding the Bank’s reach and capabilities. Gulf Bank promptly initiated the necessary feasibility study and due diligence, as per the CBK’s regulatory framework. The Bank’s communication with Boubyan Bank has since progressed, culminating in the signing of a Memorandum of Understanding (MoU) between the two institutions, which was disclosed on September 17, 2024. This MoU lays the groundwork for independent assessments of the merger, ensuring that any actions taken are in the best interest of both banks’ shareholders and investors, while adhering to regulatory requirements.

In the most recent disclosure regarding the merger, Gulf Bank has announced the CBK approved consultancy firms that will be carrying out the feasibility study and due diligence for the merger including Goldman Sachs as the Investment Consultant, PricewaterhouseCoopers as the Financial and Tax Consultant, International Counsel Bureau as the Local Legal Consultant, and Freshfields Bruckhaus Deringer as the International Legal Consultant.

Throughout this process, Gulf Bank remains fully committed to complying with all applicable regulations and obtaining the necessary approvals from the CBK and other regulatory bodies. The Bank will continue to update its shareholders and the market on any material developments as they arise.

Creditworthiness

Gulf Bank continues to be well recognized internationally in terms of its credit worthiness and financial strength by international credit rating agencies for its sound capitalization, improving profitability and strong asset quality. As of 30thSeptember 2024, Gulf Bank has an affirmed ‘A3’ Long-Term Deposit Rating and ‘Positive’ outlook from Moody’s Investor Services. In addition, The Bank has an affirmed Long-Term Issuer Default Rating at ‘A’ with a ‘Stable’ Outlook and a Viability Rating of ‘bbb-‘ by Fitch Ratings. Moreover, Gulf Bank has also an affirmed Long-Term Foreign Currency Rating of ‘A+’ with a ‘Stable’ Outlook from Capital Intelligence Ratings.

Appreciation

Al-Kharafi concluded his remarks by stating:“Looking ahead, we are confident in our ability to achieve sustainable growth, driven by our strategic discipline, along with our commitment to innovation, strong financial performance, and a customer-centric approach.” He added: “On behalf of the Board of Directors, I would like to thank our shareholders for their ongoing trust, and our employees for their commitment and dedication. I would also like to thank the Regulatory Authorities for their continuous support. Finally, I want to thank our customers for their loyalty and reiterate our commitment to offering them the best banking experience.”

Key Financial indicators:

• Nine months 2024 net profit of KD 40.2 million.

• Nine months 2024 operating income of KD 146 million, an increase of 4.2 percent compared to same period of last year.

• Operating profit reached KD 78.6 million, an increase of 4.5 percent compared to same period of last year.

• Net loans and advances grew by 6.9 percent year-to-date to reach KD 5.6 billion.

• Non-performing loan ratio as of 30 September 2024 is 1.3 percent, with a strong non-performance loan coverage ratio of 334 percent.

• Capital ratios as of September 30, 2024, Tier 1 ratio was 14.2 percent and Capital Adequacy Ratio (CAR) was 16.3 percent.